More than $300m (£200m) of health funding to Zambia's government is being suspended by the Global Fund to fight Aids, Tuberculosis and Malaria.
It said it was concerned about alleged corruption in connection with one or more grants to the health ministry.
But some aid will be channelled through other groups, a spokesman told the BBC.
It is not the first time Zambia has lost aid amid corruption claims: Sweden and the Netherlands stopped health aid and the EU halted road-building funds.
'Slowness in action'
The director of communications for the Global Fund, John Liden, told the BBC life-saving treatments would not be hit.
He said the health ministry had failed to take the necessary steps since the corruption was first detected.
"We have identified a set of individuals, we have alerted Zambian government authorities about this," he said.
"We have repeatedly asked for action, there has been slowness in action on the Zambian side.
"That's one of the reasons we feel we do not have confidence that the Ministry of Health, at this stage, can continue to channel funding of this magnitude for health in Zambia."
Health Minister Kapembwa Simbao, however, said that structural reforms had been made in the ministry and he was confident there would be no new cases of fraud there.
Correspondents say the decision will be a big blow to the government which depends on aid to treat HIV and Aids.
The Global Fund also suspended assistance to Uganda five years ago for "serious mismanagement of its funds".
The organisation was set up in 2002 under the direction of then-UN Secretary General Kofi Annan.
It has distributed more than $19bn in aid targeted at tackling HIV/Aids, malaria and tuberculosis.
BBC world affairs correspondent Adam Mynott says the fund has undoubtedly had its successes and it is estimated that it has helped save more than five million lives.
Its funding, which comes from government and private sources, is directed at the world's poorest nations.
Many of them are in sub-Saharan Africa, where corruption is widespread and there is a tacit but reluctant acceptance that some money is bound to go missing, our correspondent says.
But in the case of Zambia, warnings to the government to get its house in order have been ignored, our correspondent says.
The European Union has withdrawn some funding to Zambia for road-building because of corruption.
And last year, the Netherlands and Sweden halted $30m of direct aid for the Zambian health ministry because money was disappearing into the pockets of officials.